Category: Travel

Laurent Belsie summarizes a new NBER paper, All Clear for Takeoff: Evidence from Airports on the Effects of Infrastructure Privatization:

When private equity funds buy airports from governments, the number of airlines and routes served increases, operating income rises, and the customer experience improves.

…As of 2020, nearly 20 percent of the world’s airports had been privatized. Private equity (PE), usually through dedicated infrastructure funds, is playing an increasing role in privatization, purchasing 102 airports out of a total of 437 that have ever been privatized.

…A key metric of airport efficiency is passengers per flight. The more customers an airport can serve with existing runways and gates, the more services it can deliver and the more earnings it can generate. When PE funds buy government-owned airports, the number of passengers per flight rises an average 20 percent. There’s no such increase when non-PE private firms acquire an airport. Overall passenger traffic rises under both types of private ownership, but the rise at PE-owned airports, 84 percent, is four times greater than that at non-PE-owned private airports. Freight volumes and the number of flights, other measures of efficiency, show a similar pattern. Evidence from satellite image data indicates that PE owners increase terminal size and the number of gates. This capacity expansion helps enable the volume increases and points to the airport having been financially constrained under previous ownership.

…PE firms tend to attract new low-cost carriers to their airports, which in turn may lead to greater competition and offer consumers better service and lower prices. With regard to routes, PE acquirers increase the number of new routes, especially international routes, more than other buyers. International passengers are often the most profitable airport users, especially in developing countries.

A PE acquisition is also associated with a decline in flight cancellations and an increase in the likelihood of receiving a quality award. When an airport shifts from non-PE private to PE ownership, its odds of winning an award rise by 6 percentage points. The average chance of winning such an award is just 2 percent.

The fees that airports charge to airlines rise after airport privatizations. When the buyer is a PE firm, there is also a push to deregulate government limits on those fees. For example, after three Australian airports were privatized in the mid-1990s, the price caps governing airport revenues were replaced with a system of price monitoring that allows the government to step in if fees or revenues become excessive.

The net effect of a PE acquisition is a rough doubling of an airport’s operating income, due mostly to higher revenues from airlines and retailers in the terminal rather than cost-cutting. The driving forces behind these improvements appear to be new management strategies, which likely includes greater compensation for managers, alongside investments in new capacity as well as better passenger services and technology.

An interesting piece in The Guardian by Howard French on Africa’s megalopolis and the difficulties of pulling together five countries with very different governments and colonial histories:

There is one place above all that should be seen as the centre of this urban transformation. It is a stretch of coastal west Africa that begins in the west with Abidjan, the economic capital of Ivory Coast, and extends 600 miles east – passing through the countries of Ghana, Togo and Benin – before finally arriving at Lagos. Recently, this has come to be seen by many experts as the world’s most rapidly urbanising region, a “megalopolis” in the making – that is, a large and densely clustered group of metropolitan centres.

…In just over a decade from now, its major cities will contain 40 million people. Abidjan, with 8.3 million people, will be almost as large as New York City is today. The story of the region’s small cities is equally dramatic. They are either becoming major urban centres in their own right, or – as with places like Oyo in Nigeria, Takoradi in Ghana, and Bingerville in Ivory Coast – they are gradually being absorbed by bigger cities. Meanwhile, newborn cities are popping into existence in settings that were all but barren a generation ago. When one includes these sorts of places, the projected population for this coastal zone will reach 51 million people by 2035, roughly as many people as the north-eastern corridor of the US counted when it first came to be considered a megalopolis.

But unlike that American super-region, whose population long ago plateaued, this part of west Africa will keep growing. By 2100, the Lagos-Abidjan stretch is projected to be the largest zone of continuous, dense habitation on earth, with something in the order of half a billion people.

A nice opening anecdote on life at the TSA from the Verge:

People cry at airports all the time. So when Jai Cooper heard sobbing from the back of the security line, it didn’t really faze her. As an officer of the Transportation Security Administration (TSA), she had gotten used to the strange behavior of passengers. Her job was to check people’s travel documents, not their emotional well-being.

But this particular group of tearful passengers presented her with a problem. One of them was in a wheelchair, bent over with her head between her knees, completely unresponsive. “Is she okay? Can she sit up?” Cooper asked, taking their boarding passes and IDs to check. “I need to see her face to identify her.”

“She can’t, she can’t, she can’t,” said the passenger who was pushing the wheelchair.

Soon, Cooper was joined at her station by a supervisor, followed by an assortment of EMTs and airport police officers. The passenger was dead. She and her family had arrived several hours prior, per the airport’s guidance for international flights, but she died sometime after check-in. Since they had her boarding pass in hand, the distraught family figured that they would still try to get her on the flight. Better that than leave her in a foreign country’s medical system, they figured.

The family might not have known it, but they had run into one of air travel’s many gray areas. Without a formal death certificate, the passenger could not be considered legally dead. And US law obligates airlines to accommodate their ticketed and checked-in passengers, even if they have “a physical or mental impairment that, on a permanent or temporary basis, substantially limits one or more major life activities.” In short: she could still fly. But not before her body got checked for contraband, weapons, or explosives. And since the TSA’s body scanners can only be used on people who can stand up, the corpse would have to be manually patted down.

“We’re just following TSA protocol,” Cooper explained.

Her colleagues checked the corpse according to the official pat-down process. With gloves on, they ran the palms of their hands over the collar, the abdomen, the inside of the waistband, and the lower legs. Then, they checked the body’s “sensitive areas” — the breasts, inner thighs, and buttocks — with “sufficient pressure to ensure detection.”

Only then was the corpse cleared to proceed into the secure part of the terminal.

Not even death can exempt you from TSA screening.

Later we get to the economics:

Actuaries measure the cost-effectiveness of an intervention — say, a pharmaceutical drug or a safety device like a seat belt — with a metric called “cost per life saved.” This calculation tries to capture the total societal net resources spent in order to save one year of life. For example, mandatory seat belt laws cost $138; railway crossing gates cost $90,000; and inpatient intensive care at a hospital can cost up to $1 million per visit. As long as an intervention costs less than $10 million per life saved, government agencies are generally happy to back them.

The most generous independent estimates of the cost-effectiveness of the TSA’s airport security screening put the cost per life saved at around $15 million. And that makes two big assumptions: first, that the agency is both 100 percent effective and 100 percent responsible for stopping all terror attacks; and second, that it stops an attack on the scale of 9/11 about once a decade. Less optimistic assessments place the number at $667 million per life saved.